The ability of some firms to sustain longer term competitive advantage relates to their capabilities according to the resource based theory of the firm. Summarise this approach to explain why some firms perform better than others in an industry.

Sustainable Competitive Advantage

Within all economies there have always been firms that are destined for success and firms that are doomed to failure... or have there? Is this an inevitable outcome predestined by exterior market forces or are there generalizations we can make about the fundamental nature of business performance that will help allow managers and entrepreneurs to shape their firms to make economic profits even into the long run? It is obvious that some firms sustain longer term competitive advantage than others and economists have different theories that purport their opinions on this subject. As is suggested by the well known Harvard economist Michael Porter, the objective of a firm is to search for, exploit, and protect opportunities to add value. Its ability to do this is dependent on its ability to keep its costs as low as possible and its ability to limit actual and potential competition. Porter believes that the fundamental factors of success are what he calls the industry attractiveness and the firm’s ability to manage its cost drivers and discusses these ideas in his successful texts, Competitive strategy(1980) and Competitive advantage(1985). These ideas however began to come under fire in the 1990’s in a Harvard business review article with the idea of competitive advantage being held with the use of core competencies “an area of specialised expertise that is the result of harmonizing complex streams of technology and work activity” (Prahalad and Hamel, 1990) and with the emergence of what became known as the Capabilities approach to firm performance or Resource Based Theory. Porter’s explanation of firm performance was questioned and economists have tried to delve deeper and look at more specific sources of individual firm success as compared to Porters generalised statements of conventional economic wisdom. It is in these more recent years that economists have attempted to pin down more specifically what gives a firm its competitive edge over its rivals. They believe that understanding these things, while they will not lead to a sure-fire list to succeed will allow for a more focused management approach. The concept held in this new theory is that the fundamental source of competitive advantage is to be found within the businesses core competencies or capabilities. “A core competency can take various forms, including technical/subject matter know how, a reliable process, and/or close relationships with customers and suppliers” (Mascarenhas et al, 1998) and the essence of success is choosing the right capabilities to build, managing them carefully and exploiting them fully. The key aspect that must be realised when discussing these capabilities is that they cannot be purchased overnight, they do not come pre-made and will not fit equally in all firms. These capabilities must be constructed over long periods of time. It is this difficulty of acquisition that makes them so crucial, for due to the way they develop they are difficult to identify let alone duplicate, by a competitor. An important milestone in the development of this theory was “Foundations of Corporate Success” (John Kay, 1993), in which Kay explores and classifies ‘distinctive capabilities’. Kay espouses the idea of three distinctive capabilities: architecture, innovation and reputation, and uses them to determine the long run value of a firm’s capabilities.

• Architecture relates to the contractual nature of the firm and its value lays in an organizations ability to create and store organizational knowledge. It involves promoting effective co-operation between the members of the firm, suppliers and customers so that they can respond dynamically and...

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...CoreCompetencies
A corecompetency is a concept in management theory originally advocated by CK Prahalad, and Gary Hamel, two business book writers. In their view a corecompetency is a specific factor that a business sees as being central to the way it, or its employees, works. It fulfills three key criteria:
1. It is not easy for competitors to imitate.
2. It can be re-used widely for many products and markets.
3. It must contribute to the end consumer's experienced benefits.
C.K. Prahalad and Gary Hamel coined the term corecompetencies, or the collective learning and coordination skills behind the firm's product lines. They made the case that corecompetencies are the source of competitiveadvantage and enable the firm to introduce an array of new products and services.
According to Prahalad and Hamel, corecompetencies lead to the development of core products. Core products are not directly sold to end users; rather, they are used to build a larger number of end-user products. For example, motors are a core product that can be used in wide array of end products. The business units of the corporation each tap into the relatively few core products to develop a larger number of end user products based...

...should strive to develop unique resources in order to gain a lasting competitiveadvantage. Competitiveadvantage, whatever is source, can ultimately be attributed to the ownership of valuable resources that enable the company to perform activities efficiently at comparatively lower costs than its competitors. Superior performance will therefore be based on developing a competitively distinct set of resources and deploying them in a well-conceived strategy. Companies should abandon the areas of operations and dispense with activities where they do not possess a competitiveadvantage and concentrate their resources where they could attain competitive strength, so as to focus on improving productivity and increased efficiency.
The concept of competitiveadvantage has taken centre stage in discussions of business strategy. Statements about competitiveadvantage abound, but a precise definition is elusive. In reviewing the use of the term competitiveadvantage in the strategy literature, the common theme is value creation.
Various School of Thought: CompetitiveAdvantage
• Porter says “competitiveadvantage is at the heart of a firm’s performance in...

...the importance of resource-based sources of competitiveadvantage in one of the industries studied on this module. You should discuss a range of companies.
‘Competitiveadvantage’ is when a firm sustains profits that exceed the average for its industry. The goal of much of business strategy is to achieve a sustainablecompetitiveadvantage. Porter identified two basic types of competitiveadvantage; cost and differentiation. These two advantages are known as ‘positional advantages’ as they describe the firm’s position in the industry as a leader in either cost or differentiation. However, in this assignment I will discuss and analyse the importance of the resourcebased view, (which is also known as the ‘inside out’ approach) to gaining competitiveadvantage in the civil aero-engine industry.
The civil aero engineering industry is an oligopolistic global industry in which no single organisation dominates the market. There are three main market competitors who are Rolls Royce, General Electric and Pratt &amp; Whitney.
The resourcebased view (RBV) approach to strategy represents a substantial shift in emphasis towards the individual resources of an...

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Producing sustainablecompetitiveadvantagethrough
the effective management
of people*
Jeffrey Pfeffer
Executive Overview
Achieving competitive success through people involves fundamentally altering how we
think about the workforce and the employment relationship. It means achieving success
by working with people, not by replacing them or limiting the scope of their activities. It
entails seeing the workforce as a source of strategic advantage, not just as a cost to be
minimized or avoided. Firms that take this different perspective are often able to
successfully outmaneuver and outperform their rivals.
........................................................................................................................................................................
Suppose that in 1972, someone asked you to pick
the five companies that would provide the greatest
return to stockholders over the next 20 years. And
suppose that you had access to books on competitive success that were not even written. How
would you approach your assignment? In order to
earn tremendous economic returns, the companies
you picked should have some sustainablecompetitive...

...1, FEBRUARY 2002
Core Competence for SustainableCompetitiveAdvantage: A Structured Methodology for Identifying Core Competence
Khalid Hafeez, YanBing Zhang, and Naila Malak
Abstract—Corecompetencies are the crown jewels of a company and, therefore, should be carefully nurtured and developed. Companies can determine their future business directions based on the strengths of competencies. However, because generalized terms such as resource, asset, capability, and competence are not clearly explained in connection with competence theory, these posing difficulties in understanding many contemporary management concepts. In this paper, we provide a summary of the recent management theories by comparing their salient features. We then propose a linking mechanism between assets, resources, capabilities, competencies, and corecompetencies. We provide a methodology to identify corecompetencies by isolating unique and flexible capabilities of the firm. We use this framework to identify the corecompetencies of a U.K. manufacturing company. The results of our analyses is to help the company to make more informed strategic management decision regarding capability development, outsourcing, focusing, or diversification, with...

...The Impact of CoreCompetencies on
CompetitiveAdvantage
1. Introduction
Companies need to learn to manage tomorrow's opportunities as competently as they manage today's businesses. The discovery of new competitive space is helped when a company has a class of technology generalists that can move from one discipline to another. The new market development can be geared up by developing the capability to redeploy the human resources quickly from one business opportunity to another. It is the top management's responsibility to inspire the organization with a view of distinct goals and help them to achieve and reach the set target.
Building core competence becomes essential to competitiveadvantage building. The organizations need to build its strategies within different clear scenarios, in different ways, based on different competencies for the purposes of achieving real advantages in the shadow of unknown, risk, and uncertain future. Therefore, The ultimate purpose of this study is to investigate the impact of corecompetencies on competitiveadvantage.
2. Core Competence
Much of the research on competitiveadvantage focused on corecompetencies as a major source of that...

...﻿1 SustainableCompetitiveAdvantageResources are the assets, capabilities, processes, information, and knowledge that an organization controls. Firms use their resources to improve organizational effectiveness and efficiency. Resources are critical to organizational strategy because they can help companies create and sustain an advantage over competitors.3
Organizations can achieve acompetitiveadvantage by using their resources to provide greater value for customers than competitors can. For example, iTunes and iPod created competitiveadvantage for Apple and value for its customers by combining elements of design, price, and capability in a unique way. But the most important advantage was being the first company to make it easy to legally download music to digital devices. (Prior to the iTunes store, the only means of acquiring digital music was illegal file swapping.) Apple negotiated agreements with virtually all of the major record labels to distribute their songs from a central online library, and iTunes quickly became the premier platform for music downloading. The easy-to-understand site came with free downloadable software customers could use to organize and manage their digital music library.4
The goal of most organizational strategies is to create and then sustain a...

...﻿Introduction
Human Resource Management (HRM) has become very important when it comes to the sustainable success of an organisation. In the last couple of years HRM has changed and advanced considerably (Anca - Ioana). It is said by Nankervis, Compton, Baird, and Coffey, (2011) that Human Resources is the one aspect of an organisation that makes it successful. HRM is essentially the part of an organisation that is in charge and accountable for the management of its people in all aspects (Nankervis, Compton, Baird, & Coffey, 2011) – treating the employees as valuable stakeholders as opposed to a resource used to produce the right work at the end of the day. This will include the overall employment experience which includes procedures, systems and processes, policy-making, planning and implementation, as well as career and training in order to develop the organisation (Heil, 2014). HRM has become prevalent when it comes to an organisations competitiveadvantage. According to Anca – Ioana, in recent years the awareness that a company cannot develop or survive without a competitve advantage over its competitors has increased. In this essay the different Strategic Human Resource Management (SHRM) models will be discussed in order to display which models will be a competitiveadvantage for an organisation. The first topic that will...

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